Wednesday, April 8, 2015

Debit Card Overdraft Problems Not Solved?

When the 2010 Amendments to Regulation E to the Electronic Funds Transfer Act mandated an opt-in regime for bank overdraft programs for debit cards, the fix seemed a good solution. See, Jennifer Martin, How Your $4 Coffee Can Cost You $39 or More if You Use Your Debit Card! Federal Level Consumer Protection and Modern Payments Transactions, Memphis L. Rev. (2009). A July 2014 Study of the Consumer Financial Protection Bureau suggests that the fix may not have worked. The study found that consumers are still incurring overdraft charges in large numbers and on transactions of $24 or less. Approximately twenty percent (20%) of those consumers who do opt-in are incurring more than ten annual overdrafts. The CFPB is looking at new regulation on debit overdrafts. It would seem that at the least revisions to the model form for such services is likely. Perhaps a cap on fees might also be warranted on debit overdrafts.

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